Intelligence Bureau report focuses more on inflation
Moneylife Digital Team 24 February 2011

The Intelligence Bureau has, in its January report, blamed adverse weather and global conditions for the rise in prices of commodities. Its focus is mainly on the commodities’ price rise, which perhaps indicates the concerns of the government ahead of the union budget

The Intelligence Bureau (IB) has, in its January report, dwelt a lot on the price rise of commodities, highlighting the concern over inflation at higher levels in the government, ahead of the union budget to be presented to Parliament on Monday. Earlier this week, C Rangarajan, chairman of the Prime Minister's Economic Advisory Council (PMEAC), said while releasing the 'Review of the Economy 2010-2011', that inflation is at an uncomfortably high level.

The IB attributes the rise/fall in prices of foodgrains to adverse weather conditions and global markets. The IB says in its report, "Prices of other essential commodities, especially sugar, declined during January-February 2011. This was primarily due to the postponement of export permission for 0.5 million tonnes of sugar, the extension of zero import duty on sugar, retention of a stock limit of 200 tonnes on traders, a higher sugar quota for January and sluggish demand. Pulses prices increased due to reports of rabi pulses crops being impacted by heavy rains in December, severe cold weather in January and perennial higher demand compared to supply. Onion prices declined due to late kharif crop arrivals, imports and a ban on exports. Potato prices declined due to an increase in fresh arrivals and estimated rise in production in the current year."

According to the report, a copy of which is available with Moneylife, wheat prices in global markets rose to $326.5 a metric tonne (mt) in January 2011 from $201.5 a mt a year ago, due to poor production and a decline in stocks. It expects global wheat stocks to decline by 9.9% to 180.9 million tonnes from 200.9 million tonnes in 2009-10. In the domestic markets, wheat prices have been steady due to an increase in the wheat acreage, supported by congenial weather conditions, higher stocks and the ban on wheat export, the report said.

According to the Food and Agriculture Organisation of the United Nations, China is facing its worst drought in 60 years. Motilal Oswal Securities has said in a research note that "while India is poised for its second highest ever foodgrains production of 232mt in FY11, the Chinese demand could rattle the international wheat market with strong impact on domestic prices. Simultaneously, the government is also planning to lift the export ban on wheat and onions that might lead to a domino effect on domestic prices."

It was announced today that food inflation in India rose marginally to 11.49% for the week ended 12th February from 11.05% in the previous week, driven by rising prices of milk, eggs, meat and vegetables. The marginal rise in food inflation for the seven-day period snaps a fortnight of consecutive declines in the weeks ended 29th January and 5th February. Food inflation stood at 21.82% in the corresponding year-ago period.

According to wholesale price data released on Thursday, vegetable prices rose by 15.89% in the week under review, despite a 9.72% decline in potato prices. Prices of wheat and pulses dipped by 1.01% and 5.62%, respectively. Cereal and rice prices rose by 2.07% and 1.65%, respectively, during the week ended 12th February.

Industry body the Federation of Indian Chambers of Commerce and Industry (FICCI) in its latest edition of Economic Outlook Survey, has said that the government must crack down on hoarders and black marketers, as this would increase food supplies. The economists interviewed have pointed out that a structural element-of rising food prices on account of continuously increasing food demand-has been built into inflation and dealing with this situation requires more effective supply side measures, FICCI said.

1 decade ago
IB needs to shove its "unintilligent" keynesian blather where the sun doesnt shine.cutting and pasting from regular econosphere blogs is no research. blaming bad weather is an old tactic -borrowed from soviet russia ,where they kept blaming weather for 60 years.the simple fact is ,govts everywhere have inflated/given cheap credit to all and sundry and now the prices of all scarce resources are being bid up.end of story.lets not be fooled by the innocent looking bearded babus at the fed/rbi. they are no different from the central planners at kremlin.

all the claptrap about supply side bottlenecks are nothing new.they existed last year too.neither is the increased consumer demand a new story.neither is moderately volatile weather a serious problem right now. the problem right now is the inability of the masses to attribute the blame to the geeks running the show in central banks.their hubris is masked by a gentle serious look which nobody sees past
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